The Impact of Beef Export Losses on the U.S. Beef Industry

by Dr. James Mintert, Professor, Department of Agricultural Economics, Kansas State University

Prior to the mid-1980s, beef exports were a minor component of total demand for U.S. beef. As recently as 1985, the value of U.S beef and variety meat exports totaled just $715 million dollars (332 million pounds, or 1.4 percent of U.S. beef production). By 2003, beef exports were valued at $3.95 billion, with total exports of 2.5 billion pounds accounting for 9.6 percent of total U.S. production.

What Do We Export?
Although the United States exports a myriad of beef items and by-products, the bulk of exports are concentrated in a relatively small number of categories. During 2003, 91 percent of exports were drawn from just nine categories, with the two largest categories accounting for approximately 60 percent of exports. The two largest categories were “fresh or chilled boneless beef,” (37 percent) and “frozen boneless beef,” (23 percent), with a combined value of nearly $2.4 billion in 2003.

Several of the remaining categories represented relatively large components of total export value. The third largest export category was “bone-in frozen beef,” which accounted for nine percent of export value during 2003. Next on the list was “frozen beef tripe,” which contributed six percent of export value. “Frozen edible offal product” was the fifth largest beef export category during 2003, accounting for five percent of total beef export value. Exports in the third through fifth largest categories were worth $793 million in 2003.
During 2003 the value of U.S. exports of beef and beef by-products averaged $325 million per month. In contrast, during January-August 2004 beef and related by-product exports totaled just $473 million, a monthly average of $59 million. This translates into an 82 percent decline in the monthly average value of exports.

The decline in exports was spread across virtually all products. For example, exports of fresh boneless beef, frozen boneless beef, and bone-in frozen beef, which accounted for 68 percent of exports during 2003, declined 84, 96, and 97 percent, respectively during 2004. In fact, a review of the top nine beef export categories from 2003 reveals large export declines during 2004 were the norm. Beef tripe exports declined 47 percent, edible offal shipments were down 88 percent, fresh, boneless, processed beef cut exports were off 38 percent, frozen tongue exports declined 96 percent, prepared or preserved offal product shipments declined 57 percent, liver exports fell 60 percent and fresh bone-in beef cut exports declined 96 percent, all compared to the prior year.

Key U.S. Beef Importers
Five countries, Japan, Mexico, South Korea, Canada, and Hong Kong, were the recipients of 90 percent of U.S .beef exports during 2003, based on value. Japan, historically the largest U.S. beef export customer, represented 35 percent of U.S. beef exports during 2003. Japan’s relative importance as an importer has declined in recent years. U.S. beef exports to Japan totaled $1.4 billion during 2003, down from $1.8 billion during 2000. The biggest decline occurred following Japan’s discovery of BSE in the Japanese herd in late 2001 and continued in 2002. Exports to Japan began to recover during 2003. At the same time exports to Japan were declining, exports to Mexico and South Korea were growing. Mexico’s share of U.S. exports during 2000 was 18 percent, but grew to 23 percent during 2003. Similarly, South Korea’s share of U.S. beef exports was 13 percent during 2000, but reached 21 percent during 2003. Canada’s share of the U.S. beef export market has declined modestly, falling from 12 percent during 2000 to nine percent during 2003.

Revenue Losses Attributable To Export Reduction
What impact did the loss of export markets have on the U.S. beef industry during 2004? The reduction in exports meant that U.S. consumers consumed more beef at lower prices than they would have had exports not been impeded by BSE induced trade bans. To estimate the total wholesale revenue loss to the industry during 2004, a trade model was developed. The model incorporated assumptions about the elasticity of demand for beef and offal in order to estimate the price impact of additional supplies on the market. Model results indicate that wholesale boxed beef prices in the U.S. during 2004 were about $0.12 to $0.17 per pound lower than if the U.S. had exported the same percentage of production as in 2003. A similar analysis of beef offal prices indicated that aggregate offal prices were $0.30 to $0.43 per pound lower than if the U.S. exported about the same percentage of production during 2004 as in 2003. Combined, reduced carcass beef and beef offal exports likely cost the U.S. beef industry $3.2 billion to as much as $4.7 billion during 2004. ©